NRC Industries Ltd, Amritsar. V. The Asstt. Commissioner of Income Tax, Amritsar.

ITA 139/ASR/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5545 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: SANJEEV SUD LD
• Keywords: Depreciation; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.139/(ASR)/2017 ASSESSMENT YEAR: 2012-13 PAN: AAACN5584H M/S. N.R.C. INDUSTRIES LTD. AMRITSAR. VS. ASSTT. C.I.T., CIRCLE-IV, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SANJEEV SUD (LD. C.A.) RESPONDENT BY: SH. RAHUL DHAWAN (LD. D.R.) DATE OF HEARING : 31/08/2017 DATE OF PRONOUNCEMENT : 3 1/08/2017 ORDER PER N. K. CHOUDHRY (JM): THE INSTANT CASE HAS BEEN PREFERRED BY THE ASSESSEE ON FEE LING AGGRIEVED AGAINST THE ORDER DATED 28.11.2016 PASSED I N APPEAL NO. 63/2015-16 RELEVANT TO THE ASST. YEAR 2012-13 BY THE LD. CIT(A)-2 AMRITSAR. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) -2 HAS ERRED IN LAW & A FACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- 2 HAS ERRED IN APPLYING THE DECISION IN THE CASE OF CIT VS. ABHISH EK INDUSTRIES. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL)- 2 HAS ERRED IN STATING THAT IT IS NOT THE CASE WHERE THE APPELLANT HAS MADE THE INVESTMENT FROM ITS CAPITAL & RESERVES. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF RUBBER BELTING AND INDUSTRIAL FAB RIC AND ITS SOURCE OF INCOME IS FROM BUSINESS. THE GROSS TURNOVER OF THE ASSESSEE FOR THE RELEVANT ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 2 YEAR IS RS.84,07,16,854/- AND GROSS PROFIT IS RS.12,06,4 8,513/- AND THE GROSS PROFIT RATE OF THE ASSESSEE FOR THE YEAR UNDER CONSID ERATION COMES OUT TO BE 14.35%. THE ASSESSEE ON PERUSAL OF THE ASSESSMENT RECOR D DETECTED THAT THE ASSESSEE HAD ADVANCED RS. 21 LACS TO AIPL, AMBUJA HOUSING AND URBAN INFRASTRUCTURE, THEREFORE THE ASSESSING OFFICER DET ERMINED THE LIABILITY OF INTEREST OF RS.142,027/- @12% BY HOLDING AS UNDER: THE ASSESSEE HAD GIVEN ADVANCES FOR NON-BUSINESS PURPOSES AN D THESE ADVANCES WERE GIVEN OUT OF COMMON KITTY I.E. ON F UNDS AND UNSECURED LOANS. THE ASSESSEE HAS NOT PROVIDED ANY PROOF OR EVIDENCE WHATSOEVER OF ANY BUSINESS PURPOSE INVOLVED IN THE GIVING OF THESE AD VANCES TO THE AFORESAID COMPANY, THEREFORE IN RESPECT OF ADVANCES GIVE N FOR NON-BUSINESS PURPOSES, INTEREST EXPENDITURE IS TO BE DISALLOWED ON PR OPORTIONATE BASIS. THEREFORE THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHKE INDUSTRIES IS SQUARELY APPLICABLE TO THE FACTS OF THE UNDER CONSIDERATION. 4. FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE ASSESSI NG OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WH O UPHELD AND JUSTIFIED THE DISALLOWANCE OF RS. 142,027/- U/S 36(1)(II I) OF THE ACT. BY HOLDING AS UNDER: THAT THE ASSESSEE HAD ADVANCED RS. 21 LACS TO AIPL AMBUJA HOUSING AND URBAN INFRASTRUCTURE. THE ASSESSEE WAS ASKED THE PURPO SE OF THIS ADVANCE IN RESPONSE TO WHICH THE ASSESSEE REPLIED THAT THE ASSESSEE COMPANY BOOKED THREE FLATS WITH AIPL AMBUJA HOUSING AN D URBAN INFRASTRUCTURE FOR ACCOMMODATION TO BE PROVIDED TO ITS K EY TECHNICAL AND MANAGERIAL EMPLOYEES AND THEREFORE THE SAID ADVANCE WA S FOR BUSINESS PURPOSES. THE ASSESSING OFFICER HOWEVER DID NOT ACCEPT THE CO NTENTION OF THE APPELLANT SINCE THERE WAS NO PROOF/ EVIDENCE OF BU SINESS PURPOSES. THE ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 3 ASSESSING OFFICER APPLIED THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. A ND DISALLOWED THE INTEREST OF RS.142,027/- U/S 36(1)(III) OF THE ACT. 5. THE ASSESSEE HAD CLAIMED TO HAVE BOOKED THREE FLATS WITH AIPL AMBUJA HOUSING AND URBAN INFRASTRUCTURE FOR ACCOMMODATION TO BE PROVIDED TO ITS KEY TECHNICAL AND MANAGERIAL EMPLOYEES. HOWEVER, THE AP PELLANT HAD NOT FURNISHED ANY EVIDENCE IN THIS REGARD AND THEREFORE TH E ASSESSING OFFICER WAS JUSTIFIED IN APPLYING THE DECISION OF HON'BLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. A ND DISALLOWED THE INTEREST OF RS.142,027/-U/S 36(1)(III) OF THE ACT. IT I S ALSO NOT THE CASE OF THE APPELLANT THAT IT HAD MADE THE INVESTMENT OF RS. 21 L ACS IN AMBUJA HOUSING AND URBAN INFRASTRUCTURE OUT OF ITS INTEREST FREE DEPOSI TS. THEREFORE THE DISALLOWANCE OF RS.142,027/- U/S 36(1)(II I) OF THE ACT WAS JUSTIFIED AND IS CONFIRMED. 6. NOW FEELING AGGRIEVED AGAINST THE ORDER PASSED BY T HE LD. CIT(A), THE ASSESSEE PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE, SUBMITTED THAT AS ON 31 ST MARCH, 2012 , THE INTEREST FREE FUNDS OF THE ASSESSEE WER E MORE THAN INTEREST FREE ADVANCES/INVESTMENTS AND IN TH IS REGARDS, OUR ATTENTION WAS DRAWN TO THE BALANCE SHEET . 7. WE HAVE GONE THROUGH WITH DOCUMENTS AVAILABLE ON RECO RD AS WELL AS RIVAL SUBMISSION OF THE PARTIES. AS IT REFLECTS FORM THE BALANCE SHEET THAT INTEREST FREE FUNDS AS MENTIONED BELOW I.E. (A) SHARE CAPITAL : 99,30,000 (B) RESERVE AND SURPLUS : 89,651,000 TOTAL : 99,581,000 ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 4 ARE CERTAINLY MORE THAN THE INVESTMENT OF RS. 21 LAKHS , THEREFORE WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT OF RS. 21 LACS AS INVESTMENT IN THE SAID COMPANY WAS OUT OF INTEREST FREE FUNDS AVAILABLE . EVEN OTHERWISE THE JUDGMENT PASSED IN CIT VS. ABHISHEK I NDUSTRIES LTD. (SUPRA) HAS BEEN OVERRULED BY THE JURISDICTIONAL HIGH COURT, THEREFORE ON THIS REASON ALSO , THE ADDITION CAN NOT SURVIVE . PUNJAB AND HARYANA HIGH COURT IN THE CASE OF THE DY. CI T, CENTRAL CIRCLE-II, JALANDHAR. VERSUS OF M/S HOLY FAITH INTERNAT IONAL PVT. LTD., ITA NO. 87/2017 O & M, DECIDED ON 24-07-2017 , DISMISSED THE A PPEAL OF THE REVENUE BY HOLDING THAT THE ADVANCES HAS BEEN MADE OU T OF INTEREST FREE FUNDS AVAILABLE AND THERE WAS NO QUESTION OF DISALLOWAN CE OF INTEREST U/S 36(1)(III) OF THE ACT. THE RELEVANT FINDINGS OF THE HO N'BLE COURT ARE REPRODUCED BELOW: 7. FURTHER, THE JUDGMENT IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA) RELIED UPON BY BOTH THE AUTHORITIES BELOW HAS ALSO BEEN OV ERRULED BY THE HONBLE SUPREME COURT IN TIRE CASE OF HERO CYCLES VS. CIT , 379 ITR 347 (SC) (COPY PLACED AT APB 112 TO 116), IN FAVOUR OF THE ASSESSE E BY HOLDING AS FOLLOWS: XXXXXXXXXXX. ASSESSEE HAD A CREDIT BALANCE IN THE BANK ACCOUNT W HEN THE SAID ADVANCE OF RS. 34 LAKHS WAS GIVEN. COMPANY HAD RESE RVE/SURPLUS TO THE TUNE OF RS. 15 CRORES AND, THEREFORE, THE ASSESSEE COMPANY COULD IN ANY CASE, UTILIZE THOSE FUNDS FOR GIVING ADVANCE TO ITS DIRECTORS. 8. FURTHER, THE RELIANCE ON THE FOLLOWING JUDGME NTS ALSO SUPPORT THE CASE OF THE ASSESSEE OVERRULING THE JUDGMENT OF ABHISHEK I NDUSTRIES, WHEREIN IT HAS BEEN HELD THAT THE DISALLOWANCE UNDER SECTION 3 6(L)(III) IS UNCALLED FOR: (I) CIT-1, LUDHIANA VS. RAKESH GUPTA, ITA NO.37-20 14, DATED 2.07.2015. (II) ACIT VS. OMAX BIKES LIMITED ITA NO.L085/CHD/ 2013 DATED 06.08.2015. 9. WE ARE OF THE VIEW THAT THE ID. COUNSEL FOR THE ASSESSEE IS CORRECT IN CONTENDING THAT SINCE THE DECISIONS IN THE CASE OF ABHISHEK INDUSTRIES LIMITED (SUPRA) AND BRIGHT ENTERPRISES PRIVATE LI MITED (SUPRA) FOLLOWED BY ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 5 THE AUTHORITIES BELOW WHILE MAKING AND CONFIRMING A DDITION HAVE BEEN OVERRULED BY THE HONBLE COURTS, THE ADDITION DOES NOT SURVIVE. 10. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE IMPUGNED ADVANCE HAS BEEN MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND THERE WAS NO QUESTION OF WHATSOEVER FOR DISALLOWING INTER EST UNDER SECTION 36(L)(III) OF THE ACT. ACCORDINGLY, WE HOLD THAT TH E DISALLOWANCE OF INTEREST UNDER SECTION 36(L)(III) PERTAINING TO THE SISTER C ONCERNS UPHELD BY THE ID. CIT(A) IS NOT JUSTIFIED, HENCE, THE SAME IS DELETED . THUS, THE APPEAL OF THE ASSESSEE IS ALLOWED. COMMISSIONER OF INCOME TAX-I, LUDHIANA. ...APPELLAN T VERSUS RAKESH GUPTA , ITA-37-2014 DATE OF DECISION:- 02.07.2015. THE APPELLANT HAS RAISED THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW:- '(I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS RIGHT IN LAW IN UPHOLDING THE ORDER OF THE LD. CIT(A) WHEREIN DISALLOWANCE MADE UNDER SECTION 36(1)(III) WAS DELE TED IGNORING THE JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD. REPORTED 286 ITR 1, RELIED UPON BY THE ASSESSING OFFICER? (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS JUSTIFIED IN LAW IN UPHOLDING THE ORDER OF THE LD. CIT(A) WHEREIN DISALLOWANCE OF HIGHER DEPRECIATION ON ACCOUNT OF E XPENDITURE ON INSTALLATION OF ELECTRICAL LINE FOR POWER TRANSMISS ION AND METERING TREATED AS NOT PART OF WIND MILL BY THE A.O. WAS DELETED BY THE CIT(A)? (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE HON'BLE ITAT WAS RIGHT IN LAW IN TREATING THE POWER EVACUATION INFRA STRUCTURE AS PART OF WIND MILL AND AS RENEWABLE ENERGY DEVICE WHEREAS THE AO HAS AMODH SHARMA BROUGHT ON RECORD SUFFICIENT MATERIAL TO PRO VE 2015.07.06 14:20 I ATTEST TO THE ACCURACY AND AUTHENTICITY OF THIS DOCUMENT CHANDIGARH THAT SAME WAS IN FACT NOT A RENEWABLE ENERGY DEVICE AND HENCE NOT ELIGIBLE FOR DEPRECIATION @ 80%? (IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS RIGHT IN LAW IN ALLOWING DEPRECIATION ON CONTRIBUTI ON FOR POWER EVACUATION FACILITY EVEN THOUGH THE ASSESSEE HAS NO OWNERSHIP OF THE ASSET BEING ONLY A CONTRIBUTOR FOR AVAILING THE FACILITY?' ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 6 2. QUESTIONS (II) (III) AND (IV) ARE ADMITTEDLY C OVERED BY A JUDGMENT OF THE DIVISION BENCH OF THIS COURT DATED 18.12.2014 TITLE D AS COMMISSIONER OF INCOME TAX-I, LUDHIANA VS M/S EASTMAN IMPEX (ITA-35 0-2013). THE QUESTIONS ARE ANSWERED AGAINST THE APPELLANT/DEPART MENT. THE APPEAL AS FAR AS THESE QUESTIONS ARE CONCERNED IS, THEREFORE, DIS MISSED. 3. AS REGARDS QUESTION (I), THE APPELLANT'S CASE I S THAT AN AMOUNT OF ` 8.89 CRORES WAS ADVANCED BY THE RESPONDENT/ASSESSEE TO H IS SON. THE RESPONDENT/ASSESSEE ON THE OTHER HAND CONTENDS THAT DURING THE ASSESSMENT YEAR IN QUESTION 2008-2009, ONLY ABOUT ` 2.14 CRORES WAS ADVANCED BY HIM TO HIS SON. IT WOULD MAKE NO DIFFER ENCE. THE TRIBUNAL HAS RIGHTLY UPHELD THE DETAILED AND REASON ED ORDER OF THE CIT (APPEALS). THE CIT (APPEALS) HAS ANALYZED THE C ASH AVAILABLE WITH THE RESPONDENT. FOR INSTANCE, THE OPENING BALA NCE OF CAPITAL AS ON 01.04.2007 WAS ABOUT ` 13.45 CRORES AND THE CLOSING BALANCE AS ON 31.03.2008 WAS ABOUT ` 10.40 CRORES. THE OPENING BA LANCE AS ON 01.04.2007 WAS ABOUT ` 73.57 CRORES AND THE CLOSING BALANCE AS ON 31.03.2008 WAS ABOUT ` 86.60 CRORES. THE OPENING BA LANCE OF INTEREST FREE UNSECURED LOANS FROM FAMILY AND FRIENDS AS ON 01.04.2007 WAS ABOUT ` 55.95 CRORES AND THE CLOSING BALANCE OF INT EREST FREE UNSECURED LOANS FROM FAMILY AND FRIENDS AS ON 31.03.2008 WAS ABOUT ` 51.46 CRORES. IT WAS NOT THE CASE OF THE AO THAT THE ASSE SSEE HAD DIVERTED THE FUNDS BORROWED ON INTEREST FOR THE AMODH SHARMA PUR POSE OF ADVANCING THE SUM TO HIS SON FOR BUSINESS. THE TRIB UNAL NOTED 2015.07.06 14:20 I ATTEST TO THE ACCURACY AND AUTHE NTICITY OF THIS DOCUMENT CHANDIGARH THAT THE AO HAD IN FACT ACCEPTE D THAT NO SUCH BORROWED FUNDS HAD BEEN DIVERTED/ADVANCED BY THE AS SESSEE TO HIS SON. THERE WAS NO NEXUS BETWEEN THE FUNDS BORROWED BY THE ASSESSEE AND THE FUNDS DIVERTED/ADVANCED TO HIS SON. THERE W ERE FREE RESERVES AVAILABLE WITH THE ASSESSEE TO ADVANCE THE INTEREST FREE LOAN TO HIS SON. IT IS NOT POSSIBLE TO HOLD THAT THE APPRECIATION OF THESE FACTS WAS PERVERSE OR ABSURD. NO QUESTION OF LAW, THEREFORE, ARISES IN THIS REGARD EITHER. 4. THE APPEAL IS ACCORDINGLY DISMISSED. BECAUSE IN ASSESSMENT YEAR UNDER CONSIDERATION, THE AVAI LABLE FUNDS IN THE HANDS OF THE ASSESSEE, WERE MORE THAN THE INVESTED AMOUNT, AND THE JUDGMENT OF CIT VS. ABHISHEK INDUSTRIES LTD. (SUPRA) O N WHICH BASIS THE AUTHORITIES DETERMINED THE ADDITION, HAS ALREADY BEEN OVERRULED, THEREFORE THE SAID ADDITION IS LIABLE TO BE DELETED. ITA NO.139/ASR/2017 ASST. YEAR: 2012-13 7 8. HENCE, WE ARE INCLINED TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 .08.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED:31.08.2017. /GP/ SR.PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER